Having broken through to an eight-year high last week, GBP/EUR promptly dropped by more than 1% at the end of the week and a similar amount against the US dollar.
The gain midweek had been prompted by the European Central Bank (ECB) cutting its main interest rate from 3.25% to 3% in the face of a barrage of problems, including the threat of tariffs from the USA next year.
Worries over that are reflected in the Purchasing Managers Index (PMI) – a gauge of business optimism – this morning, with French and German service industry bosses considerably more optimistic than those in manufacturing.
We’ll hear the UK’s result shortly, but there’s a warning of what the mood in the UK may be from the trade group Make UK, this morning, which found manufacturers’ business confidence at its lowest ebb since spring 2020. “While overall conditions had begun to gradually improve during the year, the Budget has brought this to a shuddering halt,” said a spokesperson, blaming the National Insurance rise.
Although the chance of the BoE following the ECB with a rate cut this week is only put at 10%, there is plenty of data for them to change their opinion before Thursday.
The last full working week of 2024 is nothing if not busy and there could be continued sharp swings. To lock in what remains an excellent rate, with GBP/EUR still 3.4% up on last year, speak to your account manager on 020 8108 5163.
One surprising bright spot for the economy appears to be the buy-to-let market, with the rise in the surcharge paid by buyers of second homes and investors going up from 2% to 5% being no deterrent, according to analysis by the estate agency Hamptons.
Tomorrow we will hear unemployment and earnings in the UK and on Wednesday it’s the turn of inflation – with a small uptick expected – ahead of the interest rate decision on Thursday.
Before that we will hear the US Federal Reserve’s own decision, expected to be a cut of 0.25%. The US has a hefty week for data too, starting with retail sales tomorrow (with some Black Friday data) and then GDP on Thursday, expected to show a small fall to 2.8%.
So, plenty to move the markets this week. Why not fix your rate before all that and start a more relaxing Christmas?
